Leasehold enfranchisement process costs
Seeks views on exceptions to the rule that parties pay their own process costs in leasehold transactions under the Leasehold and Freehold Reform Act 2024.
The Leasehold and Freehold Reform Act 2024 (“LFRA 2024”) will make several significant changes to the statutory enfranchisement processes through which leaseholders can buy the freehold of their property or extend their lease in England and Wales.
The LFRA 2024 sets out the requirement that each party should bear their own non-litigation costs (“process costs”), except in a limited number of exceptions. These are where: a claim is of low value; it fails due to the act or omission of the leaseholder; or where the enfranchising leaseholders require a freeholder to receive a leaseback of flats held by leaseholders who are not participating in a collective enfranchisement. The government also intends to introduce an additional exception to allow certain third parties to leases such as resident-led management organisations to recover their process costs from leaseholders where they would otherwise be at risk of insolvency.
The Secretary of State and the Welsh Ministers have powers to prescribe in secondary legislation the maximum amount of costs that landlords will be able to recover from leaseholders, under the process costs exceptions.
In this consultation, we ask about the levels of process costs that are currently paid in enfranchisement transactions. We also ask for views on the government’s proposed approach to implementing the process cost exceptions under the LFRA 2024 and on bringing forward a new exception for certain third parties in primary legislation.
Your answers will help inform the secondary legislation that will prescribe the process costs of landlords payable by leaseholders where a process costs exception applies.
Separately, we are also consulting on prescribing the enfranchisement valuation rates.